Driven by the global energy transition, energy storage technology has become key to addressing energy supply-demand imbalances and enabling the widespread adoption of renewable energy. As many countries and regions accelerate the construction of energy storage systems, Italy is set to experience a peak in large-scale grid integration in 2024. With continued government support, the energy storage market is transitioning from household storage systems to larger-scale commercial and industrial projects, and substantial growth in installed capacity is expected in the coming years.
Overview of the Energy Storage Market
In recent years, Italy’s energy storage market has grown rapidly, particularly in the residential storage sector. Early on, the Italian government’s Super Bonus 110% tax incentive program significantly boosted the installation of home solar-plus-storage systems. This policy provided up to 110% tax relief, effectively covering the costs of equipment and installation, and offering substantial financial support to homeowners. The program helped drive a sharp increase in residential energy storage installations, making it a key driver of market growth.
However, since 2023, as the Super Bonus 110 incentive began to taper off, reducing the amount of tax relief, demand for home storage systems has slowed. At the same time, as financial support policies shift and the market matures, consumer willingness to invest in residential storage has decreased. Unless new subsidy policies are introduced, growth in the Italian residential storage market is expected to remain subdued. With the reduction of high-value subsidies for home energy storage, consumers' willingness to invest in such systems has dropped, which may limit the further expansion of the market.
Large-Scale Storage Projects: Accelerating Construction, Surge in Demand
While the residential energy storage market faces challenges, large-scale storage projects in Italy are experiencing rapid growth. Starting in 2024, with the gradual launch of capacity auctions and the MACSE energy storage auction mechanism, the structure of Italy's energy storage market is shifting toward large-scale storage projects.
In December 2023, the European Union approved Italy’s €17.7 billion energy storage plan, which aims to invest €17.7 billion by the end of 2033 to build storage capacity totaling more than 9GW/71GWh. This move is designed to support Italy in addressing the increasing amounts of renewable energy generation and issues like curtailment of wind and solar power. Energy storage systems will provide various services, such as frequency regulation, load balancing, and flexibility in the electricity market, effectively addressing the variability of wind and solar power generation.
The plan will be supported through renewable energy auction mechanisms, ensuring the profitability and long-term viability of energy storage projects. The government will provide fixed price guarantees for energy storage developers, offering subsidies when market prices fall below the execution price, and refunding excess profits when market prices exceed the contract price. This approach creates strong economic incentives for developers, encouraging more investment in the market.
2024: Energy Storage Projects Entering Full Construction Phase
In 2024, Italy’s energy storage market will enter a peak period of large-scale installations. According to the plan, 2.1GW of storage capacity projects awarded through capacity auctions are expected to begin construction in 2024. This will drive significant growth in installed capacity, promoting the overall development of Italy's energy storage sector.
Particularly, large-scale energy storage projects (e.g., storage systems with durations of 3-4 hours) will start construction in 2024, significantly contributing to the growth in installed capacity. By the first quarter of 2024, 120MW of 2.1GW of capacity auctioned projects were already operational, while 122MW of 230MW awarded in fast reserve auctions have also been deployed. As these projects are completed and brought online, Italy's large-scale energy storage facilities will help address the intermittency issues of wind and solar power, increasing the utilization of renewable energy.
Policy Support: Driving Sustainable Growth in the Storage Sector
In the context of the European energy crisis and the rapid growth of renewable energy, Italy’s energy storage market has received significant policy support, particularly in terms of financial incentives and market mechanisms.
In 2023, the Italian government increased its fiscal support for the storage sector under the €17.7 billion storage plan approved by the European Union. The focus of this plan is to build large-scale storage infrastructure to handle the increasing volume of wind and solar power generation and address energy supply flexibility and stability issues. Additionally, Italy is promoting renewable energy projects in its southern regions and plans to invest €6.3 billion in energy storage as part of its digital and energy transition framework.
In February 2024, Italy approved the National Recovery and Resilience Plan, which includes a series of renewable energy and storage projects in southern Italy, further boosting the growth of the energy storage sector. By the end of 2024, Italy is expected to add significant storage capacity, solidifying its position as a key player in the European energy storage market.
Future Outlook: Potential and Challenges in the Italian Storage Market
In the coming years, as renewable energy capacity continues to grow, Italy will face increasing issues related to wind and solar curtailment. To ensure the success of its energy transition, energy storage will be crucial in solving these problems. The Italian energy storage market has vast potential, especially with the large-scale storage projects leading the way, which are expected to substantially increase installed capacity.
However, as the market grows, there are also challenges. The first challenge is the risk of policy changes, particularly adjustments to subsidies and incentives that could affect market investment sentiment. Another challenge is that large-scale energy storage projects have long construction timelines and involve substantial investment, requiring coordination of resources and technological support. Therefore, whether Italy can continue to grow its energy storage market in the coming years will depend on its ability to innovate in storage technologies, reduce project costs, and improve system efficiency.
Overall, Italy’s energy storage market is poised to reach a new development peak in 2024, and with strong policy support and increasing market demand, Italy is likely to become one of the leading players in Europe’s energy storage sector.
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